Freight logistics companies that get their reverse logistics right significantly reduce costs associated with storage and distribution, and don’t spend as much on inventory resources. One of the greatest benefits in making the returns process easy for your customers is that it increases their good feeling, and as a result their loyalty, to your brand. Successful business today requires thinking about lifetime value – and a good returns process is very much a part of that.
The returns big picture
The amount of returned goods can vary wildly and range from as low as 3% to as high as 50% of total shipments across all industries. Those return shipments can eat up 3-5% of total revenue if they’re not handled correctly. It may surprise you to know that, for traditional brick-and-mortar stores, returns are three to four times more expensive than outbound shipments. In some industries such as book publishing, catalogue retailing, and greeting cards, over 20% of all products sold are eventually returned to the vendor. What’s more surprising is that some industries are estimated to have return rates in the range of 30% to 60%.
How returns can help increase sales
It might sound counterintuitive at first, but retailers who pay for merchandise returns end up selling more than their non- paying competitors. A Journal of Marketing study showed customers who are offered free returns spend up to 457% more than they did before they returned the original purchase. On the other hand, customers who had to pay return shipping charges reduced their repeat purchases by 75-100%.
The volume and cost of unwanted items returned each year is staggering (estimated £600m and growing), so it’s imperative for online retailers to have their reverse logistics operations in order. The sooner they can get eligible returned merchandise back into the sales funnel, and generate data to improve their merchandise offerings, the better.
Why reverse logistics should form part of your commercial strategy
The return ratio varies depending on the type of business, where products are being shipped and the return options offered to the customer. It’s estimated that over 50% of online retailers offer free return shipping. This puts pressure on smaller, independent retailers to do the same or be out of the game.
When figuring out the commercials, here are some factors to consider:
- There is an increased barrier to entry driven by Amazon, who is disrupting the market at every turn. Amazon Prime’s membership base is estimated at over 80m and continues to grow, setting the benchmark for shipping. With 51% of consumers wanting free returns, it’s essential to develop a deep understanding of your buyers in order to anticipate their expectations and manage costs.
- The number of m-commerce transactions is predicted to overtake e-commerce transactions globally by the end of this year (2019)
Major retailers have adopted an omni-channel approach to better serve their customers. Growth in deliveries will mean growth in returns. Deploying the right technology to unify the process throughout the supply chain is key.
- With multiple modes of carriers available and a multitude of delivery options, optimising for operational efficiencies and customer relationship management can overwhelm businesses of any size. Simplifying shipping processes is crucial to managing costs and getting returned merchandise back into the sales funnel. With 89% of consumers likely to repurchase after a positive return experience, getting your strategy right is a core component to driving the bottom line.
- Reverse logistics can cost double the outbound investment, and as online purchases increase, paying attention to this process is simply unavoidable. Flexible and real-time access to carrier information, simplified processing, and visibility of costs are all important factors when creating your reverse logistics strategy.
Ecommerce shipping tactics explained
All free returns are not equal. To give you an overview, here are some of the most common free return shipping tactics on offer today. Choosing the right returns policies and processes for your business will go a long way in ensuring your future success.
Offered during special promotional periods as an incentive for customers to buy more. Many retailers offer free shipping and returns if a certain spending level is met, and/or if the customer returns the items within a certain time period.
Offered on selected products of a certain value, typically combined with free delivery and within a certain time period.
Returned within a certain time period, but may not include free shipping
Membership and monthly fee qualifies the customer for free shipping and return (AMAZON Prime is the clear market leader here)
Spending a certain amount over a period of time with the same company qualifies customers for free shipping and returns.
Le Exchange and Return
A read through Net-A-Porter’s returns page is a great example of how the higher end of the market up the ante in the reverse logistics landscape, with ‘complimentary shipping’. Customers are encouraged to ‘try’ their products in the comfort of their own home and free collection is offered at their home address, work address or any alternative… Brand loyalty soars!
Make it Personal
An extreme example of finding ways to make delivery personal is Waitrose’s recent (and somewhat controversial) new scheme of drivers accessing and unpacking your delivery in your home. Less intrusively, ‘personal’ notes and information about the specific product delivered make receiving more meaningful and, perhaps, returning less casual.
For online retailers with brick and mortar stores ‘click & collect’ drives footfall, however allowing consumers to return items in store works in same way:
“Many retailers report that customers collecting their orders in-store often buy additional items, so the upsell opportunity is there, especially when staff training, store design and carefully considered promotions are there to support it.” Essential Retail
Finally, here are some quick tips for optimizing your returns strategy:
Offer free returns, but reduce the need for them. Many online fashion retailers are addressing the inherent inability for online shoppers to touch and feel their garments by implementing sizing tools online. They have a database of measurements for various brands and styles, and based on those, they can suggest the right size which helps to reduce the return rate.
Build returns into your business model. Companies like Warby Parker and Zappos have returns weaved into the DNA of their businesses. In fact, Zappos has found that their customers with the highest return rates are also their best customers in the long run. Meanwhile, when Warby Parker, a company that makes eyewear, first started, they made up for the fact that they had few brick-and-mortar stores by shipping potential customers five frames to try on for free. They knew all of the frames would be returned, but the chances of a purchase were greater than if they didn’t offer this service.
Gather and analyze your data. Speaking of Warby Parker, their data scientists have loads of data regarding what frames certain customers choose. They can compare and contrast similarities between older frames and newer frames, and therefore offer options that might like in the future based on what’s in their shopping carts. This can also have the effect of reducing returns; the likelihood that the frames will fit and match the customer’s aesthetic is higher.
Control the entire package journey. When you choose a return shipping solution for your customers, you should be able to monitor the entire journey of a package, including the returns process, in real-time. A lost return is not only a lost sale, but it’s also potentially a lost customer who’s expecting a refund that never arrives.
The first step in getting on top of your business’s returns ‘personality’ and developing a seamless returns process to make returns not just easy for your customers but, very importantly, stress-free for you, is to plug-in the best management software. At SmartConsign we pride ourselves on solving problems for businesses of any size to ensure confident competitiveness in the marketplace. Get in touch with us today and let us show you how simple it is to implement our software to fully optimise you delivery process.